Last Thursday, Treasury Secretary Stephen Kennedy more or less told the government that NDIS Minister Bill Shorten held the most senior tax post in the cabinet.
And yesterday Shorten laid out the beginnings of a plan to make it happen, but after nine years of mismanagement and outright neglect of the NDIS by the Coalition, this is just the beginning of a very big task.
Kennedy sounded the alarm on the budget in general in a speech to economists, saying government spending would drop from an average of 24.8% of GDP before the pandemic to 26.4% in the future, forever.
The massive cost of a thriving NDIS
He didn’t specify, but it’s a three-year expansion in government size of $50 billion a year, now increasing with GDP growth.
In other words, if they are lucky enough to keep it, spending growth could be much higher.
Almost half of that increase over the last three years is the National Disability Insurance Scheme and no one has any idea what it will cost in the future.
The NDIS was a wonderful innovation introduced by the Gillard government in March 2013 with a budget of $14.3 billion, funded by a 0.5% increase in the Medicare levy.
It was originally aimed at controlling the cost of disability, after a report by Pricewaterhouse Coopers in 2011 found that the status quo would cost more.
But the cost projections were wrong, and if Shorten doesn’t get the program revamped right, he’ll find himself in a war with the nation’s disabled and their caregivers, something no government wants.
The budget issues identified by Kennedy are not entirely about the NDIS, but mostly they are, as this chart from his speech shows:
This 0.8 p. 100 represents an increase of approximately $20 billion.
But all previous estimates of what the NDIS would cost were wrong – about the number of people needing help as well as the cost of caring for each of them.
The Productivity Commission thought the number would be 583,000 by 2030, but the National Disability Insurance Agency now says it’s likely to be 860,000, and the average cost has risen from $38,900 to $54,300 over the past four years, largely due to rorts and overload. .
A review of NDIS actuarial work by actuaries Taylor Fry estimates the scheme could cost $74.2 billion by 2029-30, more than double what it costs now.
But Taylor Fry also said there was “a high degree of uncertainty in the NDIS cost forecasts, especially over a longer time horizon.”
“The NDIS was never meant to be the only way”
The fundamental problem with the NDIS is that, according to the Australian Government Institute of Health and Welfare, there are over four million people with disabilities in Australia, but only 518,668 of them are currently registered with the NDIS.
If all four million people benefited, the cost would be over $200 billion instead of the current $34 billion and consume half of all Commonwealth tax revenue.
But as Bill Shorten said yesterday, “NDIS was never meant to be the only way to care for people with disabilities.”
But it does mean that the number one fiscal task of Treasurer Jim Chalmers and Bill Shorten, and ultimately Prime Minister Anthony Albanese, will be to decide which of Australia’s more than four million disabled people will miss the NDIS and stay in the wilderness.
To say the least, it’s a horrifying task for any politician and could end up crushing the new government – either destroying the budget or destroying Labor’s legitimacy as a benevolent left-wing government, or both, because that the number of people on the NDIS is growing too fast and blowing the budget, but millions of people with disabilities are still being left behind.
On the ABC Insiders Yesterday Bill Shorten said he thought the NDIS was sustainable and needed to restore confidence in it.
His plan, outlined in the interview, is to end fraud and overcharging, including the $40 million a year spent on attorneys to fight appeals from rejected people with disabilities trying to access the NDIS. , to make it more efficient and less bureaucratic and perhaps most importantly, to make sure it’s not a “wasteland” outside of the NDIS, as he put it.
“The second tier of services is inadequate, there really is nothing after the NDIS,” he said.
According to the government’s own figures, there are 3.5 million disabled people in this desert, most of whom will never move to the green hills of the NDIS.
Unsurprisingly, stories constantly pop up about deserving people being rejected for the NDIS.
People like Lisa Giles, who had to stop working in 2005 with multiple conditions, including severe cervical spinal stenosis. She is on the Disability Support Pension but is ‘desperate’ for more help, according to an ABC report.
Or Rita Barnett, who lives with myalgic encephalomyelitis/chronic fatigue syndrome (ME/CFS), a complex and disabling multisystem disorder characterized by severe, long-lasting fatigue, among other symptoms.
Both women were turned away by the NDIS.
Or Alicia Appleby, who has had two strokes, has mild intellectual disability and needs constant care, but is living in the geriatric ward of a Melbourne hospital due to a dispute with the NDIS over her plan of accommodation.
Hobson’s pick for the job
If Chalmers and Shorten don’t resolve this soon, stories like this will become the death of a thousand cuts.
There are clearly several things to do:
- Be clear about the problem and clearly explain how the cutoff works to go to the NDIS or stay in the “wasteland” outside
- Secure the second tier of services outside of the NDIS, so it’s not a wasteland
- To consider means to test it – should rich families get the same as poor families? This was not brought up by Bill Shorten yesterday, but it should be discussed and
- Find a way to raise more money, either directly through a bigger levy or more generally, so that the care and defense of the elderly can also be properly funded.
The latter is what Stephen Kennedy suggests. He briefly floats the idea of making “structural savings” in the budget elsewhere, but rightly rejects this and instead opts to increase tax revenue.
What taxes should be increased? Corporate taxes, he implied, not personal income taxes, which he says will rise anyway with bracket creep (which should NOT be rendered by cuts taxes).
He points out: “…we are experiencing an all-time high in the terms of trade and the banking sector is very profitable.
(Implied, but not stated, by Kennedy is the fact that the 23.9% of GDP cap on tax revenue, invented by the LNP coalition, will have to go – after all, spending is 26.4% of GDP , so the recipes have to be at least that).
The Australian Financial ReviewJohn Kehoe’s economics editor made a telling point about this the other day: “Norway has built a US$1.3 trillion sovereign wealth fund out of oil resources, just a fraction of the mineral wealth and energy from Australia. Australia ended up with a debt of 1,000 billion dollars.
The Albanian government has Hobson’s classic choice – uphold Labor’s undeserved reputation as a heavily taxed party or be seen as heartless for the disabled.
It would be a terrible mistake to choose to help business profits rather than help people with disabilities.
Alan Kohler writes twice a week for The new daily. He is also editor-in-chief of Eureka Report and financial anchor on ABC News.